Audio available in app
Rebalance your portfolio from "summary" of The Little Book of Common Sense Investing by John C. Bogle
The concept of rebalancing your portfolio is a critical component of successful investing. In essence, it involves periodically adjusting the allocation of your assets to ensure that they remain in line with your investment objectives and risk tolerance. By rebalancing, you bring your portfolio back to its target asset allocation, which helps to manage risk and optimize returns over the long term. Rebalancing is necessary because asset classes can perform differently over time, leading to a shift in the original asset allocation of your portfolio. For example, if stocks have a strong performance relative to bonds, your portfolio may become more heavily weighted towards stocks than you initially intended. This can expose you to greater risk than you are comfortable with. By rebalancing, you sell some of the assets that have performed well and buy more of the underperforming assets to bring your portfolio back into alignment with your target allocation. This forces you to buy low and sell high, a fundamental principle of successful investing. It also helps you to stay disciplined and avoid emotional decision-making based on short-term market fluctuations. While rebalancing can involve transaction costs and tax implications, the benefits of maintaining a balanced portfolio typically outweigh these concerns. Research has shown that rebalancing can enhance returns and reduce risk over time, leading to better long-term performance. It also helps you to stay focused on your investment goals and avoid making impulsive decisions that can derail your financial plans.- Rebalancing your portfolio is a simple yet powerful strategy that can help you achieve your investment objectives and build wealth over time. By periodically adjusting your asset allocation to maintain a balanced portfolio, you can manage risk, optimize returns, and stay disciplined in the face of market volatility. So, be sure to regularly review your portfolio and make any necessary adjustments to ensure that it remains in line with your long-term investment strategy.
Similar Posts
Use a simple formula to pick stocks
The idea behind the simple formula for picking stocks is to find good companies that are priced at bargain levels. The formula ...
Real assets like real estate can also be a safe haven during bear markets
It's important to remember that when the stock market is heading south, real assets like real estate can provide a safe haven f...
Avoid market timing and focus on longterm potential
The investor who places primary emphasis on timing, in the hope of being able to buy at the psychologically moment and sell the...
Cultivate a mindset of abundance and wealth
To truly understand and embrace the concept of abundance and wealth, one must first shift their mindset from scarcity to abunda...
Ethical considerations are important in the world of finance
Ethical considerations are paramount in the world of finance. The decisions made by financial professionals can have far-reachi...
Focus on longterm investing
Long-term investing is a concept that is often overlooked or misunderstood by many investors. Instead of trying to time the mar...
Be skeptical of market hype and trends
The intelligent investor must be wary of succumbing to the allure of market hype and trends. It is all too easy to be swept up ...
Understand the value of money
Understanding the value of money is a fundamental aspect of financial literacy. It is not just about knowing how much a dollar ...
Investors often fall victim to narrative fallacy
One of the most common pitfalls that investors face is the tendency to fall prey to what is known as the narrative fallacy. Thi...
Avoid high fees
One thing to avoid is high fees. If an investment has a 5 percent front-end load, for instance, you start off 5 percent in the ...